"After GST rationalisation, amid festive spending, rural demand remained robust and urban demand is recovering. We expect more than 7 per cent Q3FY26 and Q4FY26 GDP growth with full year growth of 7.6 per cent," SBI Research noted.
Earlier on Friday, considering continued lower food inflation, with higher kharif production, healthy rabi sowing, adequate reservoir levels and conducive soil moisture, the Reserve Bank of India (RBI) reduced the inflation projection for FY26 to 2.0 per cent from the October estimate of 2.6 per cent and February 25 estimate of 4.2 per cent.
The Q1FY27 estimates are now lower by around 100 basis points to 3.9 per cent from 4.9 per cent put out in June 2025. The Q3FY26 estimates at 3.8 per cent now stand at 0.6 per cent as per the new forecast.
"We forecast inflation for FY26 at 1.8 per cent and for FY27 at 3.4 per cent. With such an unprecedented level of downward revisions and further prospects of downward revision looming large, the RBI has kept the door ajar for future rate decisions," SBI Research said.
However, for now, the repo rate at 5.25 per cent will be lower for longer.
The RBI has also revised Real GDP growth for 2025-26, which is projected at 7.3 per cent now. Real GDP growth for Q1 FY2026-27 is projected at 6.7 per cent and for Q2 at 6.8 per cent.
However, ongoing tariff and trade policy uncertainties will impact external demand for goods and services.
On Friday only, the RBI MPC has unanimously decided to cut the repo rate by 25 bps to 5.25 per cent. The MPC also continue with the neutral stance. Consequently, the SDF rate shall stand adjusted to 5 per cent and the MSF rate and the Bank Rate to 5.50 per cent. Cash reserve ratio (CRR) is at 3 per cent.
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